The dark tunnel of VATMoss

I’ve just emerged from a dark tunnel; trying to find my way through a maze. Other metaphors may apply. I’ve been implementing VATMoss. It has not been fun. There are lots of other resources online to help you work through this tunnel if your business is affected by the dark shadow of VATMoss. I’ll just tell you a little bit about my own journey with this.

First, I thought I knew what I was doing.

When I set up my new side-line of providing a library of business ideas: New Business Ideas Collection, I thought I knew what I was doing. I was aware of VATMoss, and I knew it would apply to me. Selling a wholly digital product and someone outside the UK, but inside the rest of the EU, might just buy something. I did my research, took some advice, and told my web designers that I would need the new website to use:

An e-commerce platform (their choice)

Xero, my accounting software, so I could record all the orders and the payments

Stripe, to take payments

Taxamo, to keep me straight with the old VATMoss

I thought I was so clever. Rhat the genius web designers would take care of all of this. Easy peasy, ticked off my list, job done. Ever had that feeling, and been proved completely wrong?

Then all the other stuff came in.

This is when I had to go into the tunnel of darkness. To cut a long story short, I had hours of conversations with the web designers and my accountant to decide how this could work in practice. I had to draw diagrams and mind maps to get myself to understand it all. The software is a bit like when you’ve got a bad back and you take Ibuprofen. It helps, but you’ve still got a bad back, and you have to do all the exercises to get better.

Not only do I need this software to help with the initial pain, but now every quarter I have to do my exercises. I have to do three returns. Including my normal VAT return, which is simple: I press the button and Xero, and put my magic code in. Then I have to do an ECSL return, and manually upload this to HMRC. And finally I have to a MOSS return.

I got my head around that, and finished sardonically laughing at the advice on the HMRC One Stop Shop which was explaining how I have to do all of these separate returns – get it? The One Stop Shop tells me I have to go to three different shops – hilarious! And then I read a bit more and realised that I would have to make three different payments to three different HMRC bank accounts.

Ridiculous!

Why this is a barrier to growing my business

When you running a business, there are lots of these things that you have to get your head around. Fortunately, most of them are more interesting than this rubbish. And usually, when you’ve done things a few times, you get used to it and you just go through the motions.

Occasionally, you mess it up. Like when I forgot to put the reference code on my VAT payment. I got a letter from HMRC through my bank thanking me for the money but telling me they’d had to give it back because they didn’t know where to put it.

But because VATMoss is new, and the advice isn’t very clear, it’s easy to go wrong. And it’s easy to think that one should just avoid all of that hassle. No one would volunteer to go through this dark tunnel or to attempt to find your way through this maze. Lots of the comments online about VATMoss are businesses saying things like:

“I’m not going to sell to EU customers then”.

“I can avoid having to deal with VATMoss by including a service element to my digital product”.

“I’ll just sell through Amazon and they’ll deal with it all for me”.

I think this is a problem for businesses in the EU. It’s a limiting factor. We don’t want to discourage businesses from selling to one another, after all, that’s how the economy works – international trade and all that – it’s a good thing, isn’t it? And we don’t want to have businesses adding in a service element to the digital product. The whole point of having a digital product is that you can sell thousands of them without it taking you any longer than it takes to sell one of them.

If I started adding in a 15-minute coaching call with every subscription to New Business Ideas Collection, for example, I might not be quite so keen on attracting thousands of new customers. That’s a lot of time on Skype. And while many people have created successful businesses selling through Amazon, etc., this does mean that Amazon gets a massive cut of your turnover.

I’ll just have to suck it up

My choice has been to just suck it up and to deal with it. I’ve paid for the software and the developer’s time to implement it, to take as much pain away from it as possible. And I’ve put a note in my diary for the 20th April when I have to make my three returns and my three payments. You might make a different choice, based on your circumstances. Or you might want to try out your new digital product by selling through a reseller to start off with. Then you can see whether it takes off enough for you to go through the dark tunnel too.

But surely all of this is completely unnecessary. It has nothing to do with my business. In fact, it’s a whole lot of hassle that takes me away from running my business. The UK government is currently moaning about the state of the economy, and that we’re less productive than other countries.

Dealing with the dark tunnel of VATMoss is certainly not productive. It’s been a serious distraction for the past few days away from what I actually need to do to make New Business Ideas Collection into a success. And ultimately, it doesn’t create any extra money to pay for schools or fire engines or any of the other things that we need to pay tax for. It’s all just a ridiculous circle of bits of VAT going into different bank accounts.

Photo credit – Tocausan

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